The battle for Shanghai... and the battle for Heathrow... and the battle for...
Control of the world's key international hubs is a key driver of structural change in the airline industry in 2008. Generally speaking, the more congested the hub, due to strong passenger demand, the greater the level of interest in airlines operating there.
The battle for control of China Eastern Airlines and the important Shanghai hub will enter a fascinating new phase tomorrow, as the details of Air China's counteroffer are released.
Earlier this month, Air China foiled Singapore Airlines' bid to buy a minority holding.
At the weekend, some details of the "strategic partnership" emerged, including that the parents of both Air China and China Eastern would purchase new shares in the Shanghai-based carrier, lifting Air China's parent's interest to 30% and delivering a USD1.9 billion cash injection into China Eastern.
Cooperation would centre on the establishment of a cargo JV (potentially providing much-needed consolidation of cargo capacity in the Mainland). But most importantly, Air China would help China Eastern form an "operations hub" in Shanghai to strengthen the use of its route network and other resources.
Meanwhile, it has emerged India's Jet Airways has expressed interest in acquiring Sir Michael Bishop's stake in bmi, which controls 11% of the slots at London Heathrow Airport.
Virgin Atlantic Airways - another key Heathrow player - could also come up for grabs this year, as Singapore Airlines seeks to sell its 49% holding in the UK carrier. SIA's focus these days is firmly on the Asian growth markets and on China in particular.
In the US, several lucrative hubs, including Atlanta, Chicago, San Francisco, Washington DC and Detroit are in play as Northwest Airlines, Delta Air Lines and United Airlines consider their merger options. United will reportedly shift its attention to Continental Airlines if it is unsuccessful in brokering a deal with Delta. Lufthansa, which controls 30% minus one share of bmi, has recently acquired 19% of JetBlue, which controls approximately 30% of slots at New York's JFK Airport - where slot auctions could soon become a reality.
Spurred by liberalisation, international airline investment strategy (of the major incumbent airlines) is increasingly becoming a game of real estate - those with the most slots at the best airports win. Little wonder airports remain the best investments in the aviation sector.